EU: No-bailout rule IV

Bailouts of financial institutions dominate the news in the United States and Europe, but does the EU Lisbon Treaty change the European Community’s (European Union’s) and other member states’ lack of responsibility for public debt of a member state, the so called ‘no-bailout’ clause?

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The currentt Treaty establishing the European Community (TEC) was to become the Treaty on the Functioning of the European Union (TFEU), and generally the innovations as agreed in the 2004 IGC were to be inserted into the Treaty by way of specific modifications ‘in the usual manner’ (points 17 and 18, pages 6 and 7). As we remember, the legal base in Article III-183(2) of the Constitutional Treaty was rewritten.

I found nothing specific in the mandate of the intergovernmental conference (IGC 2007 Mandate, Council document 11218/07, 26 June 2007) about Article 103 TEC.

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In Article 2, point 89 of the original Treaty of Lisbon (ToL) the IGC 2007 agreed on the following concerning Article 103 TEC (OJ 17.12.2007 C 306/71):

89) In Article 103, paragraph 2 shall be replaced by the following:

‘2. The Council, on a proposal from the Commission and after consulting the European Parliament, may, as required, specify definitions for the application of the prohibitions referred to in Articles 101 and 102 and in this Article.’.

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The TFEU table of equivalences confirms that Article 103 TFEU (ToL) in the original Treaty of Lisbon was to be renumbered Article 125 TFEU in the consolidated version, under the title ‘Economic and monetary policy’, renumbered Title VIII (OJ 17.12.2007 C 306/211─212).

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Consolidated Lisbon Treaty

Article 125 of the Treaty on the Functioning of the European Union (TFEU) is found in the consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union, published in the Official Journal of the European Union, OJ 9.5.2008 C 115/99:

Part Three Union policies and internal actions

Title VIII Economic and monetary policy

Chapter 1 Economic policy

Article 125 TFEU
(ex Article 103 TEC)

1. The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.

2. The Council, on a proposal from the Commission and after consulting the European Parliament, may, as required, specify definitions for the application of the prohibitions referred to in Articles 123 and 124 and in this Article.

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With regard to the current Article 103 TEC, in the first paragraph, the ‘Community’ was replaced by the ‘Union’; one of the so called horizontal amendments.

Paragraph 2 was rewritten. As in the cooperation procedure (Article 252 TEC), the Council acts on a proposal from the Commission. But according to the Lisbon Treaty, the European Parliament is only consulted.

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Proposal from the Commission

Here is a reminder of the significance of a proposal from the Commission, as laid out in the Treaty of Lisbon (consolidated version, OJ 9.5.2008 C 115/173):

Article 293 TFEU
(ex Article 250 TEC)

1. Where, pursuant to the Treaties, the Council acts on a proposal from the Commission, it may amend that proposal only by acting unanimously, except in the cases referred to in paragraphs 10 and 13 of Article 294, in Articles 310, 312 and 314 and in the second paragraph of Article 315.

2. As long as the Council has not acted, the Commission may alter its proposal at any time during the procedures leading to the adoption of a Union act.

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The following instalment is going to take a look at some comments concerning Article 125 TFEU.


Ralf Grahn